Commentary: No Way To Auction Off Airwaves

It's some of the most valuable real estate of the Internet Age--the invisible information highways in the sky known as the radio spectrum. The airwaves, of course, are already crowded with TV broadcasts, cell-phone conversations, and radio shows. But there is still some spectrum available, and companies such as Verizon Wireless and BellSouth Corp. want it desperately. Without it, they won't be able to offer faster Palm Pilot connections, cell phones that surf the Web, or laptops that dial the office from the beach.

Just how valuable? In April, when Britain auctioned off rights to spectrum for wireless Internet services, it raked in a staggering $36 billion, four times the original estimate. And later this year, Uncle Sam hopes to make billions of its own--and kick off a wave of wireless innovation in America--by auctioning off rights to the similar airwaves over the U.S.

Alas, the U.S. wireless revolution will start with a whimper, not a bang. Thanks to botched congressional moves, much of this spectrum isn't available now for these new services. It is still being used for old-fashioned analog TV. That little obstacle forced the Federal Communications Commission on May 2 to delay the U.S. auction from June until Sept. 6. If the FCC can't find a way to auction it off soon, that could leave America behind Europe and Japan in the global race to develop and offer new wireless communication services.

The problem goes back to a misguided giveaway in the 1996 Telecommunications Act that allowed TV broadcasters to use the airspace for analog shows until at least 2006. Many of the roughly 100 TV stations at the top end of the dial--mostly small ones--between Channels 60 and 69, wouldn't be missed by most Americans. But many TV broadcasters are refusing to let go--and, in the end, may require payment to leave. U.S. wireless carriers say they can't wait until 2006 if they hope to compete in the global market. "It's totally outrageous," says Tom Wheeler, president of the Cellular Telecommunications Industry Assn. "They're not only holding onto their old spectrum, they're using it to extort those who want to move into that spectrum."

NO GUARANTEE. Broadcasters retort that the public will complain if they can't get all their channels. "We have obligations to our viewers," says Martin D. Franks, senior vice-president at CBS Corp. Still, the FCC must find a solution. One promising idea from media investment bank Allen & Co. and Washington startup Spectrum Exchange is to hold a pre-auction auction to relocate broadcasters in Channels 60 to 69 to lower channels. That means finding stations willing to vacate those channels for a price.

There's no guarantee the plan will work. But it's the best thing going, since Congress isn't likely to remedy its mistake in an election year. And fast action is needed. "We need some sense of when broadcasters will be out of there," says Howard J. Haug, assistant vice-president for strategic management at BellSouth. Adds Peter Cramton, chairman of Spectrum Exchange: "Without a sensible plan to clear incumbent broadcasters, this spectrum will lie fallow."

Maybe not absolutely fallow. But clearly, analog TV is not the best use of the space today. Failing to make the most of this prime property is a lousy way to run the New Economy.

Before it's here, it's on the Bloomberg Terminal.